tv Nightly Business Report PBS November 5, 2010 6:30pm-7:00pm PDT
>> susie: the nation's unemployment rate remains stuck at 9.6%. how much longer will americans have to deal with economic pain? >> i think it will be a number of years. i think this is a long, slow climb out of a very deep hole that we've gotten ourselves into. >> tom: that's the sober outlook from a veteran fed decision maker. our exclusive interview with former federal reserve vice chairman donald kohn, coming up. you're watching nightly business report for friday, november 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: ning sponst
>> susie: good evening everyone. some signs of life in the job market. american businesses were hiring last month. there are still many people out of work. the pick up in hiring was much bigger than analysts expected: the labor department said non- farm payrolls rose by 151,000 jobs in october. but the pace of job growth is not strong enough to bring unemployment down. it remains stuck at 9.6%. president obama calls the jobless rate quote, unacceptably high. as stephanie dhue reports, the challenges facing the president and washington lawmakers. >> reporter: in october there were more jobs for temporary office workers, in health care, retail, and mining. while the growth was greater than expected, president obama says more needs to be done. >> i am open to any idea, any
proposal, any way we can get the economy growing faster, so people who need it, can find work faster. >> reporter: economist dean baker says lawmakers have their work cut out for them. that's because it will take a lot more than 150,000 new jobs each month to bring the unemployment rate down. >> this isn't going to go far, you need 100,000 just to keep pace with the growth of the labor force, so we're getting 50,000 on top of that, at that rate, it would take about 15 years to get back to where we should be in terms of a normal unemployment rate. >> reporter: total government jobs fell by 8,000 in october and more cuts are expected as state and local governments face tight budgets. >> i think unemployment rate will go up before goes down. >> reporter: but there are some bright spots-- the hourly workweek increased, that's significant because employers typically boost hours before adding workers. and average hourly earnings increased five cents, which could lift consumer spending. while economist kevin hassett
expects job growth to pick up, he thinks unemployment will be double what it was before the financial crisis for some time. looks like we could have 8% unemployment eight years from now and economic growth in the 2% range, which is what we're seeing right now. >> reporter: to boost jobs president obama wants tax breaks for small businesses and new infrastructure spending. republicans want more tax cuts. hassett says lawmakers need to think outside the box. >> what we need to do is stop fighting about the bush tax cuts and start thinking about what we can do to give ourselves the kind of growth that we need to bring the unemployment rate down. >> reporter: high unemployment could unjam political gridlock as democrats and republicans make compromises to boost the economy. but high deficits will make that a tough task. stephanie dhue, "nightly business report," washington. >> tom: here are the stories in tonight's n.b.r. newswheel: stocks end the week with a whimper: the dow rose nine points, the nasdaq was up a point, and the s&p 500 gained
four. trading volume dropped from yesterday's levels on both the nyse and the nasdaq. fewer people are signing contracts to buy a home. the national association of realtors says pending home sales dipped in september falling 1.8%. economists had expected a gain of 3%. bank of america won't be buying back any bad mortgages. the banker today rejected calls from several big investors to do that. those investors, including the new york fed claim b. of a. knew it was making bad loans and packaged them in mortgage backed securities. b. of a. is facing $375 billion worth of suits over m.b.s.'s. and aviation week reports tonight boeing is delaying deliveries on some orders for the new 787 dreamliner. boeing hasn't commented, but its shares were down about 2% in after hours trading. still ahead, after 18 months of unemployment jennifer marzalack
is back at work. in tonight's you're hired-- she shares her experience with unemployment. so how does the federal reserve plan to put america back to work? tonight we get a unique perspective on fed policy from a man who was a key player in fed decisions over the past 40 years. donald kohn, former vice chairman at the fed, sat down today with washington bureau chief darren gersh for his first television interview since leaving the central bank two months ago. darren began by asking kohn how the fed's plan to buy hundreds of billions of dollars in bonds will help create jobs. >> buying bonds helps to lower interest rates. and we've already seen that since chairman bernanke began to discuss the possibility of buying bonds last august at jackson hole, and raised that possibility, and interest rates have fallen. we've seen 10-year real interest rates fall by about a half point, i think, in that time.
lower interest rates help in a number of ways. they reduce the cost of borrowing, encourage people to borrow and spend. they will bolster asset prices, and we've seen a good gain in equity markets over the past couple of months. it is not entirely, i'm sure, due to what the federal reserve is saying, but i think that is probably contributing. and we've seen a modest decline in the dollar, which should help encourage exports, and help industries that are competing with imports coming into the country. i think this feeds through to financial condition more generally. the financial conditions should encourage spending. as spending is encouraged, that should help to create jobs. >> so the unemployment rate is almost 10% right now. is the fed going to keep going with quantitative easing until it gets down to 8%, 7%? does it have a target there? >> i'm sure there isn't a
magic level by which they keep going untilee that level. monetary policy works with long and variable lags. so the federal reserve needs to be forward-looking, and i think they'll need to see a downward trend in that unemployment rate. and they'll need to see prospects that inflation will rise from the lower levels that it is right now, up towards their target. >> is there a limit on the number of -- the amount of bonds and assets the fed is willing to purchase? >> there is no theoretical limit and what it could buy. it, in effect, prints the money or prints the reserves in order to buy the assets. but i do think that the federal reserve will be quite aware there are potential costs and difficulties as it accumulates assets. >> but does it become a problem over -- what is it, a trillion dollars? is it two trillion dolls? >> i don't know. i don't think there is a particular number you can say this is okay. and that wouldn't be okay.
i think it depends very much on the economic circumstances, what is going on in the economy. what is happening to inflation. what is happening to jobs. i don't think there is any arbitrary limit on they're okay on one side of the line. they're not okay on the other side of the line. >> how effective is this policy going to be? lowering interest rates specifically, and they're down to zero almost, is powerful, but this program is kind of a bank shot. it works by trying to bring down other assets, by raising the stock market. >> in that regard, i think this program doesn't differ significantly by the way we operated before by raising and lowering shorshort-term interest rates. raising short-term interest rates would lower asset prices. the federal reserve doesn't affect spending directly.
it affects the in cent incentivs to do spending. i think in that regard, the quantitative easing program isn't significantly different from the old way, the former way, we operated policies with short-term interest rates. there are those who say that the -- some of the channels currently are clogged. that the decline in interest rates might not be as affective as it would be under other circumstances, and i think there is some truth to that. >> clogged meaning the banking system isn't working as well as it used to? >> the banking system, and people who might borrow are, i think, being held back by a great deal of uncertainty. so there are some channels clogged. but i don't think they're all clogged. i do think there should be some effect on spending over time with lags from the easing of financial conditions that has accompanied the expectations of additional
quantitative easing. >> you mentioned printing money. and there are some people who say the fed is trying to drive down the dollar. is that an explicit goal, to get exports up by driving down the dollar? >> no, it is not. i think the effect on the dollar is very much a by-product of pursuing the explicit goal of trying to stimulate spending and keep inflation from falling further. it is not the objective of the federal reserve to drive the dollar down. it is part of the overall channels of monetary policy, but it is not what monetary policy is aimed at. >> republicans are already criticizing the federal reserve, saying that it is de-basing the currency and taking a risky bet. how much measure is the federal reserve going to be under in this congress? >> i think it is very hard to say how much pressure -- >> will it have an impact? >> i don't think it will have an impact.
i think the federal reserve was created with an arms length to the political process. the elected representatives said we understand we'll give you these goals, maximum employment and stable prices, from our short-term influence because in our view, you can realize the public's goals of high employment and stable prices easier without us interfering with you constantly in the short run. and the federal reserve will be and should be required to explain why it is doing what it is doing, and why this is in the public interest. there is nothing wrong with that. >> donald cohn, the former vice chair of the federal reserve. thank you for being here. >> thank you, darren. it was a pleasure to be here.
>> tom: investors had plenty to digest this week from the election, to the federal reserve, earnings and finally today's employment report. let's take a look at tonight's "market focus." the major indices each added about 3% this week, thanks especially to yesterday's big rally. the dow industrials added almost 3% for the week, up four out of the past five weeks. the nasdaq is up for five weeks in a row, rallying 2.9% for the week. and the s&p 500 climbed put in the best performance among the trio, up 3.6% from a week ago.
in a week full of market news, perhaps the biggest surprise was today's better than forecast jobs report. still, that did not inspire much broad-based buying after yesterday's big rally. instead, it was focused on financials. the big bank exchange traded fund added to thursday's rally, gaining another 2.5%. this pushes it over $24 for the first time since august. three of the biggest and most widely owned bank stocks did well. wells fargo jumped more than 6% on heavy volume. this is close to a six month high. j.p. morgan added another 3% today. bank of america up 2%. the federal reserve may be close to allowing strong banks to raise their dividends. dividend increases were halted during the bank bailouts. this was the last of the three peak weeks of earnings reports. since the start of the quarter. the financial sector has reported the biggest increase in earnings, up 95% compared to last year. telecom services, meantime, show the worst sector earnings,
falling 9%. and the telecom sector was the biggest drag on the market today, including sprint. shares sank back close to their august lows. it warned today it would be hurt if mobile network provider clearwire fails. sprint owns 54% of clearwire. clearwire dropped 3%. it says it has enough cash to last through the middle of next year. clearwire's 4th generation mobile network has helped sprint begin to turnaround its business. while we're talking mobile communication, dell will switch 25,000 employees from blackberries to dell's own smartphone called the venue pro. rimm said its highly unlikely dell will save money. rimm stock dropped 2.5% while dell was fractionally lower. dell's smartphones run microsoft's new windows seven software. microsoft was off 1%. six months ago coal miner massey energy was reeling from the worst coal mining disaster in 40
years. 29 people died. even as the federal investigation continues, the company is the subject of take over rumors. at least three miners are reportedly interested. with today's 11% jump, massey stock is at its highest price since the week of the fatal explosion. and that's tonight's "market focus." mickey mouse is heading to mainland china. disney announced today a deal to build a theme park in shanghai. its partnering with the shanghai shendi group on the project.
but the companies are still waiting for approval from the chinese government. the one and a half square mile park is expected to cost nearly $4 billion. the company's other chinese project-- disneyland hong kong-- hasn't performed as well as expected, reporting a loss last year. here's what we're watching for next week: our friday market monitor guest is eugene peroni, portfolio manager at advisor's asset management. we'll also see the september reports on wholesale trade and international trade. monday, the business of sports. we kick off our series "beyond the scoreboard" with a look at falling raceway revenues as the nascar season races to an end. about two and a half million a.t.&t. u-verse customers have to cook meals and fix up their homes without the food network and hgtv. the latest cable fight involves scripps, the owner of those channels and a.t.&t. this fight is about money, and also about digital rights to the channels and how they'll be
carried online. while a.t.&t. believes scripps wants too much money, both sides are still negotiating. for the second time in two days, a qantas airways plane has made an emergency landing after taking off from singapore. today's incident involved a boeing 747. an investigation is already underway into what caused an engine to explode yesterday on a qantas airbus a-380 aircraft. no one was hurt in either incident. qantas says it's too early to know for sure, but it suspects a faulty part or engine design flaw in both incidents. rolls-royce made the engines on both planes.
corporate cash, new hiring and dividend paying stocks are adding up to new yearly highs. so says tonight's market monitor. he's robert stovall managing director and strategist at wood asset management. >> tom: and he joins us tonight from the nasdaq. bob, welcome back to n.b.r. nice to see you again. >> thank you, tom. >> tom: let's begin with today's unemployment. does it change your thesis about the stock market? >> not at all. if you look at the data for the last several weeks and months since may, the data has been showing a slight vibration of improvement. i think that just fits the pattern. i think things will be
getting better gradually in the future, and people now expecting a 2% g.d.p. growth will start talking about 3% plus half way through the new year. >> tom: if employment hasn't changed your bullishness, what about the election results or the fed action this week? did that make you more confident? >> i think it just -- it doesn't discourage me any. the record shows history is not correct all the time. but the record shows that a market that rallies into an intermediate election usually keeps on rallying. >> tom: let's find out how this optmistic is carrying out in a portfolio. you brought along three new picks. we'll begin with exxon-mobil. xom. a bit of a disappointment for shareholders, especially for the broader market. here is exxon only at a multi-month high. what is going on? >> it is the worst performing stock in the
dow 30. normally i stay away from the worst performing stocks. i prefer to go with the best performer because it usually keeps getting better. but in this case, i think things are more likely to improve, that's why i have it down there as one of the picks. and the dividend is pretty good, too. >> tom: you also like sea drill, a foreign base deep sea driller based in norway. is it still putting money to work at $33? >> yes. i must say we've had it for a while now, and it is up a bit. but i think it has a target of about $38 if things work out. they are launching themselves into a new capital spending cycle of adding equipment. and they're not in dangerous places in terms of drilling, such as the gulf of mexico, but they're heavy around the world. the equipment is run top of the line. i think as they reequip,
the earnings will keep on moving up. >> tom: give us 15 seconds on unilever, that competes against proctor & gamble. what makes you like this? >> it's a giant, and it's global, and it is one that people don't pay much attention to, despite the multiplicity of its brands and market penetration. i think the current management has some goals which they're meeting to date. and it's a chance they're going to increase their top-line growth and their profit margins, which is somewhat of a lagger with a nice dividend. >> tom: may 14th, the last time you were with us, you had a trio of stocks. coconoco-phillips, up almost 11%. and united technology is the lagger, but still higher by better than 7%. does you still like these three? >> i like all three. and be ibm is making big highs this week. >> tom: do you own all six of these we mentioned
tonight? >> either individually or through our investments that we have at wood asset management, yes. >> tom: our market monitor this evening is robrobert stovall at wood as set management. companies are finally starting to hire, as we saw in today's jobs report. one person who found work in recent months is jennifer marszalek. in our ongoing series "you're hired" she tells us about her journey on and off the unemployment line. ( phone rings ) >> sure, payroll, this is jennifer. i'm jennifer marszalek. i was out of work for about 18 months before i started at sure payroll as director of payroll where i am the director of human resources. i had worked for room and board home furnishing for about 11 or 11 and a half years as a human resource manager in chicago. they restructured. they sell home furnishings and nobody needs a new sofa when their job is in danger. it was kind of hard to wrap my head around at first.
i have always been in human resources. i did a lot of hiring every single year and so to be on the other side of it and not have a job was difficult. i really worked every single day at looking at job boards. so, i really used career builder and monster. i used linkedin was particularly i probably rewrote my resume five or six times over the 18 months. from one company, i learned that i didn't have enough metrics listed or measurements listed on my resume, so i rewrote it to have more accomplishments listed. i joined the chicagoland hr transition group in october of 2009. there was something about that group that really helped me feel connected to working. and, it made me feel accountable to other people and having to kind of report back to what i was doing.
i think you have to have a positive outlook. i was a recruiter before i lost my job and i am a recruiter now and people want to hire people who have confidence. i think this is a really good fit for me. i'm really excited and glad that this is the opportunity that materialized for me. >> tom: a story of one job-seeker finding work. that is "nightly business report" on this friday, november 5th. sec cul difficulties prevented us from hooking up with susie. thanks for tuning in. i'm tom hudson. we hope to "nightly business report" is made possible by: